Supervalu Eyes How Changes Impact Independents

As Supervalu works out the details of rethinking its approach to its retail operations, it may make significant changes in the way it buys goods and delivers them to its stores, Craig Herkert, president and chief operating officer of the Minneapolis-based company, said here at the annual Morgan Stanley Global Consumer & Retail conference. By taking a more holistic view of the company with

NEW YORK — As Supervalu works out the details of rethinking its approach to its retail operations, it may make significant changes in the way it buys goods and delivers them to its stores, Craig Herkert, president and chief operating officer of the Minneapolis-based company, said here at the annual Morgan Stanley Global Consumer & Retail conference.

“By taking a more holistic view of the company with its multiple formats, we can look at our network and decide the best ways to buy and distribute,” he explained.

As previously reported, Supervalu is taking a more geographically centered approach to its operations, evaluating its presence by market rather than by store banner or format.

Some independent operators see value in the possible changes, Herkert said, while others are concerned about competing with their supplier.

“But it's our job to figure out how to make it all fit together,” he said. “There may be cases where some operators will have to deal with cannibalization from another Supervalu format, but we will have to grow with that.”

Herkert singled out three markets to illustrate the kinds of changes Supervalu is contemplating.

In Chicago, Jewel-Osco has the No. 1 market share, “but if we look at Chicago as a Supervalu market rather than a Jewel-Osco market — with 13 Save-A-Lots there and a variety of independent operators serving different ethnic groups — there may be a better way to serve customers overall,” he said. “For example, we are working with some independents there to expand to other locations.”

In Pasco, Wash., an Albertsons is across from a Save-A-Lot, plus there's an independent operator with four stores who is one of Supervalu's wholesale customers, he pointed out, “but they're all part of the Supervalu family, though each serves a different consumer segment.

“Right now, we service them from three distribution centers because of the way the company grew and developed. But we may decide that, instead of three trucks from three facilities delivering to each format, it may be better to have one truck from one facility making three stops.”

In Pittsburgh, several Supervalu-supplied independents operate Shop ‘n Save stores as well as Save-A-Lot locations, “so it's one group of owners but two store formats, which tells me we can operate multiple formats in a market and each one can stand on its own, and there may be ways to leverage our portfolio of banners and ownership models more effectively.”

He said Supervalu also plans to include Save-A-Lot's needs in its discussions with its private-label suppliers “so we can deliver a better cost of goods.”

Herkert said Supervalu is also looking at ways to combine functions within the company — for example, by having the Save-A-Lot development team in St. Louis report to Supervalu's development team in Minneapolis “to leverage the talent better,” rather than have each one operating completely separate from the other.